One of the best things I came across this past week was this terrific review by Morgan Housel where he shared insights from the book “Mistakes Were Made (But Bot By Me)” by Elliot Aronson and Carol Tavris. Several members have recommended this book to me so I was very interested to read his review.
According to Mr. Housel, this are the six most important things all of us should learn from this book, many of which are very important to investors and traders alike:
1. Everyone wants to be right and hates admitting the possibility of being wrong.As fallible human beings, all of us share the impulse to justify ourselves and avoid taking responsibility for any actions that turn
out to be harmful, immoral, or stupid. Most of us will never be in a position to make decisions affecting the lives and deaths of millions of people, but whether the consequences of our mistakes are trivial or tragic, on a small scale or a national canvas, most of us find it difficult, if not impossible, to say, “I was wrong; I made a terrible mistake.”
The higher the stakes — emotional, financial, moral — the greater the difficulty. It goes further than that: Most people, when directly confronted by evidence that they are wrong, do not change their point of view or course of action but justify it even more tenaciously. Even irrefutable evidence is rarely enough to pierce the mental armor of self-justification.
2. You brain is designed to shut out conflicting information.In a study of people who were being monitored by magnetic resonance imaging (MRI) while they were trying to process dissonant or consonant information about George Bush or John Kerry, Drew Westen and his colleagues found that the reasoning areas of the brain virtually shut down when participants were confronted with dissonant information, and the emotion circuits of
the brain lit up happily when consonance was restored. These mechanisms provide a neurological basis for the observation that once our minds are made up, it is hard to change them. (more…)